The next two days are jam-packed with quarterly results from some of the biggest and most recognizable companies.
Amazon.com, Inc. (NASDAQ: AMZN), the
world’s largest e-commerce site is among the post-session Thursday releases, but it’s not the retail results that analysts say they
are most interested in seeing. It’s the cloud-based operations that have been the big margin story and analysts wonder how long
that trend will continue.
LinkedIn Corp (NYSE: LNKD) releases after
the bell on Thursday too, and analysts wonder if that $26.2 billion buyout offer from Microsoft Corporation
(NASDAQ: MSFT) is in jeopardy, considering the EU is taking
a closer look at the deal, and even some U.S. rivals are calling for deeper scrutiny.
Meanwhile, the oil patch has proven to be a tough place to grow revenues as crude oil prices stay low—dipping below a crucial
support level of $50.00 a barrel this week. Two of the biggest players, Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX) will report what may be a sad, sagging sales update on Friday before the
market opens.
AMZN Makes Its Mark
In the early days of the new century and e-commerce, traditional brick-and-mortar retail executives gave short shrift to AMZN
while the online retailer strutted along. Fast-forward to 2016 and AMZN has surpassed Alphabet Inc (NASDAQ:
GOOG) (NASDAQ: GOOGL) as the first source for online product searches, according to a Bloomberg
poll that said 55% of Americans now use AMZN as their search engine for merchandise.
While the retail end of the business hasn’t been as big a profit-generator as some had hoped, analysts say the still-fledgling
Amazon Web Services is the gift that keeps on giving, accounting for about 55% of the entire company’s operating income, thanks to
a robust 25% operating margin, according to company reports. AMZN has consistently invested in the operations side of the business,
and analysts say the spend has given it a leg up in the e-commerce sector that few retailers will be able to challenge. Its
investments in music, grocery and apparel appear to be paying off too, according to some analysts. Cowen & Co., for example, says
it expects AMZN to snatch the No. 1 position in apparel sales from Macy’s Inc (NYSE: M) next year.
What might investors want to know about the company as we head into the busy holiday-selling season? Analysts say they will be
watching the pace of deliveries, whether the August début of Amazon One, a leased Boeing 767-300, is going well, and they would
like an update on the grand scheme for delivery. They also say they will be looking for more information on the cloud business,
which is facing stiff competition from the likes of Alphabet and Microsoft. Finally, they will be eager to see the numbers of new
Amazon Prime members, who reportedly spend nearly double on the site, compared to non-members, according to sales studies.
AMZN shares are up 36% on a year-over-year basis, and since bottoming in early February, AMZN shares have risen some 74%. What’s
more, year to date, AMZN share movements have shown an 85% correlation to the S&P 500 (SPX).
At Thomson Reuters, analysts are forecasting a profit of $0.78 a share, which would mark its sixth straight quarter of operating
in the black. That would be a 359% gain over last year’s per-share profit. Amazon has beaten analysts’ earnings expectations in
four of the last five quarters. On the revenue side, the average estimate is $32.7 billion, almost 29% above the year-ago topline
sales.
Short-term options traders have priced in a potential share price move just under 5.5% in either direction around the earnings
release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.
Buyers are active at the 835- and 840-strike prices while put buyers are zeroing in at the 800-strike price. The implied
volatility is relatively high, at the 63rd percentile. (Please remember past performance is no guarantee of future results.)
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over
a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined
price over a set period of time.
Is This MSFT Buyout of LNKD Still a Go?
Analysts say the top focus, by far, when LNKD turns in its Q3 results after the bell today, will be the outlook for the $26.2
billion buyout by Microsoft. In its quarterly results last week, Microsoft said the deal was on track and should close by the end
of the year.
While regulatory officials in the U.S. and Canada already have given the green light on the deal, the European Union isn’t so
sure. EU antitrust regulators are worried that rival sites might not be able to compete against the professional network’s data,
according to the Wall Street Journal. In an effort to measure the rough value of the data, the EU sent questionnaires to
competitors, WSJ reported.
And yesterday, Salesforce.com Chief Executive Marc Benioff called for more scrutiny of the deal because of Microsoft's size, WSJ
reported, expressing concern about the concentration of data Microsoft would eventually possess.
"When you're the largest software company in the world, when you're Microsoft, you need to be treated differently," Benioff said
at the WSJDLive conference.
LinkedIn has managed to grow revenue and profit, mostly by stepping up member engagement, according to analysts. Those polled by
Capital IQ expect a per-share profit of $0.91 on topline sales of $955.5 million, some 21% ahead of last year’s. LinkedIn has
outpaced Wall Street’s expectations for 15 straight quarters.
Short-term options traders do not seem to be expecting much action on the stock, pricing in a potential 1.5% share price move in
either direction around the earnings release, according to the Market Maker Move™ indicator.
There have been few buyers of weekly calls, but some action was seen at the monthly 190- and 200-strike prices. The put side saw
buyers at the 185 strike. The implied volatility is at the relatively low 20th percentile.
XOM and CVX Still Struggling
It’s been a tough trudge through the oil patch for giants like XOM and CVX for quite some time, as the price of crude has
remained stubbornly low amid a glut of inventories that analysts say show no solid signs of diminishing. This week’s dip below that
key $50.00 a barrel level is not likely to help either, say analysts who not so long ago were thinking that West Texas Intermediate
oil prices could hit $60 a barrel by the end of the year.
What are they thinking now? Analysts say they will be looking for some fresh views on the future of oil prices and production
cuts when XOM and CVX report Q3 results before the bell Friday.
Analysts reporting to Thomson Reuters project XOM to report profit to have declined over 40% from last year, at $0.58 share
versus last year’s $1.01 a share. Revenues are expected to come in at $61.3 billion, down from $67.3 billion a year ago.
For CVX, analysts are forecasting a big drop in profit to $0.37 a share compared with the year-ago profit of $1.22 share, on
revenues of $29.0 billion, lower than last year’s $34.3 billion.
Short-term options traders seem to expect little action around the results. They have priced in a potential 1.4% share price
move for both XOM and CVX in either direction around the earnings release, according to the Market Maker Move™ indicator.
Buyers of XOM options have been seen at the 88-strike calls and the 85 strike puts. The implied volatility is at the 18th
percentile. For CVX, there’s activity around the 105-strike price for calls and the 98 strike for puts. CVX’s implied volatility
sits at the 25th percentile.
Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not
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